Chapter 13 review.

This chapter was one of the few chapters that I had more difficulty to understand. I would give this a rating of 2.5/3. After where the book talked about accounting profit and economic profit, the terms got more difficult to understand. I especially had trouble with interpreting the graphs and understanding the average and marginal costs. 

Chapter 13 first explains the concept of different costs to production with additional vocab words like explicit and implicit costs. Firms take into account a variety of costs in order to maximize economic profit, which is different from an accounting profit. Accounting profit simply subtracts explicit costs from total revenue whereas economic profit accounts for implicit costs or opportunity costs. This is why economic profit is always less than accounting profit. To help me understand implicit and explicit, I think of implicit as more than just money, and explicit as hard money statistics. This part was not as difficult

The chapter later discussed the marginal costs and the marginal product of producing another good along with a graph showing these costs, which includes variable cost and total cost. Average variable cost decreases over time and goes up in a u shape later on. I had trouble interpreting the graphs. 

Also, Average total cost does the same because marginal cost is smaller in the beginning and gradually becomes larger. Marginal product is the increase in the product produced for each new input. This number gradually decreases. Cost usually increases because of lack of space or material a firm has.  And to minimize cost, at the economy of scale (the lowest point of average total cost) is where firms produce at to maximize profit.